SOLAR ENERGY ETF BOUNCES OFF KEY MOVING AVERAGE -- FIRST SOLAR SURGES OFF KEY RETRACEMENT -- GT ADVANCED TECH AND SUNEDISON LEAD THE GROUP -- SOLARCITY CONSOLIDATES NEAR KEY RETRACEMENT -- SUNPOWER FORMS BULLISH CONTINUATION PATTERN
SOLAR ENERGY ETF BOUNCES OFF KEY MOVING AVERAGE ... Link for today's video. The Solar Energy ETF (TAN) is perking up with a bounce off its rising 200-day moving average and a break above the 50-day moving average. Chart 1 shows TAN hitting a new high near 50 and correcting back to the 37-38 area. The decline from the early March high to the mid May low was over 25%, which shows just how volatile this ETF can be. The decline also formed a falling wedge, which is typical for corrective patterns. The move above the wedge trend line and above the 50-day suggest that the correction is ending and the bigger uptrend is resuming. Chartists can use the 200-day for the first support level. A close back below this line (39) would suggest a failed breakout and call for a reassessment.
(click to view a live version of this chart)
Chart 1
The indicator window shows the StockCharts Technical Rank (SCTR) near 100 until early April. This means TAN was one of the top performing ETFs during this period. The SCTR turned quite volatile during the correction with some wild swings above/below 50. The SCTR caught my eye last week because it surged from 40 to 97. This relative strength surge indicates that TAN is once again one of the top performing ETFs.
FIRST SOLAR SURGES OFF KEY RETRACEMENT ... An ETF is only as good as the sum of its parts. There are a lot of foreign holdings in the Solar Energy ETF, but seven of the top ten are traded in the US. Chartists interested in an ETF should keep track of the top components because these are usually the key drivers. The next five stocks account for around 35% of the Solar Energy ETF.
Chart 2 shows First Solar (FSLR) surging above resistance in March with a move to 75 and then correcting back to the breakout with a decline to the upper 50s. Yes, these volatile stocks are not for the faint of heart. FSLR bounced off the 62% retracement and broken resistance in mid May. The stock is now challenging the April trend line and a breakout at 67.50 would be bullish.
(click to view a live version of this chart)
Chart 2
GT ADVANCED TECH AND SUNEDISON LEAD THE GROUP ... GT Advanced Technologies (GTAT) and SunEdison (SUNE) are two of the strongest stocks within the solar group. Why? Because both are very close to their March highs and on the verge of breakouts. Chart 3 shows GT Advanced Technologies recovering after a sharp decline in early May and breaking above the April trend line in late May. The stock stalled in early June and then resumed its advance with a surge above 18 on good volume.
(click to view a live version of this chart)
Chart 3
(click to view a live version of this chart)
Chart 4
Chart 4 shows SunEdison with a big advance from August to March and a large triangle over the last four months. A triangle after an advance is usually a bullish continuation pattern. SUNE is showing strength as it challenges triangle resistance. A breakout would signal a continuation of the bigger uptrend and project a move to new highs.
SOLARCITY CONSOLIDATES NEAR KEY RETRACEMENT... Chart 5 shows SolarCity (SCTY) hitting a new high in late February and then giving a big chuck back from March to May. This stock, however, IPO'd in December 2012 and surged from 10 to 85 in fourteen months. The March-May decline to 50 retraced around 62% of the September-February advance, which is normal for a correction within a bigger uptrend. SCTY is currently firming in the 50 area and a break above the May highs would be bullish.
(click to view a live version of this chart)
Chart 5
SUNPOWER FORMS BULLISH CONTINUATION PATTERN... Chart 6 shows SunPower (SPWR) with a large inverse head-and-shoulders. Keep in mind that the inverse head-and-shoulders can be a bullish reversal pattern or a bullish continuation pattern. It all depends on the prior move. An inverse head-and-shoulders after an advance represents a consolidation within an uptrend. A break above neckline resistance ends the consolidation and signals a continuation of this advance. The indicator window shows upside volume expanding during the surge off the head low and the surge off the right shoulder low.
(click to view a live version of this chart)
Chart 6
SEMICONDUCTOR SPDR LEAD THE MARKET AND TECH SECTOR ... The Semiconductor SPDR (XSD) is clearly one of the strongest industry group ETFs in the market right now. Chart 7 shows XSD breaking wedge resistance with a surge in mid May and moving to new highs over the last few weeks. The indicator window shows the StockCharts Technical Rank (SCTR) above 90 for the last three weeks and above 60 the entire year. There are no signs of weakness on this chart, but the ETF is up over 15% from its mid May low and getting overextended. Even though the ETF is ripe for a corrective period, relative strength in XSD is still valuable information. We know that this industry group is strong and it may be worth our efforts to look for stocks with bullish setups in the semiconductor group.
(click to view a live version of this chart)
Chart 7
ADVANCED MICRO DEVICES BREAKS KEY TREND LINE... I usually don't like to feature low-priced stocks because they have above average volatility and risk. Moreover, stocks are often priced low for a reason. Just keep that in mind when faced with a stock below $5. Chart 8 shows Advanced Micro Devices (AMD) with some serious volatility as the stock gapped down twice and filled both gaps (October and January). Most recently, the stock moved steadily higher the last four months and broke above triangle resistance with good volume the past week. Also notice that the stock gapped up in April and held this gap. The May lows mark support in the 3.8-3.9 area.
(click to view a live version of this chart)
Chart 8
ARM HOLDINGS FORMS SMALL BULLISH REVERSAL PATTERN... Chart 9 shows ARM Holdings (ARMH) within a rather volatile range the last nine months. The stock has basically fluctuated between 41 and 55 since September. The Fibonacci Retracements Tool shows the 50% line at 47.94 (call it 48). With the stock near 45 and change, this means it is in the bottom half of the nine-month range. ARMH may be down, but it does not look out just yet. The stock formed a small inverse head-and-shoulders pattern from late April to June. A move above the May highs would break neckline resistance and reverse the medium-term downtrend. Notice that this inverse head-and-shoulders formed after a decline. This makes it a reversal pattern because there is a downtrend to reverse. Also keep in mind that the inverse head-and-shoulders is not confirmed until the neckline breakout.
